New York's Budget Rendezvous With SALT Deductions
Cuomo revealed that New York has a revenue shortfall of $2.3 billion.
In November 2017, Andrew Cuomo was just one of the many Democrats already denouncing the soon-to-be-passed Republican tax reform. The New York governor fumed, “I’ve said repeatedly the more people learn about this tax plan, the more they’re going to learn that it’s wrong for New York. I’ve also said that they’re playing New Yorkers for fools and New Yorkers are not fools.”
Actually, New York is playing us for fools.
Cuomo complained specifically about the tax reform’s modification to SALT (state and local tax) deductions. He stated, “In the tax reform plan, they end the mortgage-interest deduction for homes over $500,000. Now, $500,000 is an expensive home, but those homes are in states like the State of New York and the State of California. They limit property tax and their compromise. They limit property-tax deductions over $10,000. A lot of states don’t have property taxes over $10,000. The State of New York … [has] many homes that pay property taxes over $10,000.” That doesn’t sound like a federal concern.
Like others, the governor was prescient in anticipating future budgetary problems. But that’s wholly a function of the Democrats’ wrongheaded handling of taxpayer money.
This week, Cuomo revealed that New York has a revenue shortfall of $2.3 billion. According to him, “[Capping] SALT was an economic civil war. It literally restructured the economy to help red states at the cost of blue states. That’s exactly what it did. It was a diabolical, political maneuver.” (Sidebar: In reality, a diabolical maneuver is Cuomo’s “directing that New York’s landmarks be lit in pink to celebrate” late-term abortions.)
In fact, the opposite is true. The way SALT deductions worked before is that lower-middle-class taxpayers, for whom SALT deductions are less accommodating, were significantly subsidizing upper-middle-class taxpayers who had the luxury of using SALT for write-offs. In other words, the tax obligations of higher earners were lessened by virtue of the fact their hefty deductions were being underwritten by people with less income.
Or as the Washington’s Examiner’s Tiana Lowe puts it, “Curbing the SALT deduction merely requires wealthier New Yorkers to foot the bill for their own recklessly high taxes rather than offload the cost of their profligacy onto other states.”
Yes, changing the SALT rules meant some states would take a big revenue hit. But reversing this wasn’t a “political maneuver.” Instead, it balanced an extremely lopsided playing field. Despite Cuomo’s assertion that “it’s wrong for New York,” the change was good for most of the nation.
Cuomo simply doesn’t want to accept the more levelheaded, tried-and-true financial approach seen in conservative states. He also literally can’t accept that tax reform worked. According to The Wall Street Journal, “Last week the Congressional Budget Office released a 10-year forecast — the first to assess the effects of tax reform after one year of hard results. Compared with its prereform projection, the CBO now expects annual GDP growth to be almost $750 billion higher by 2027, the last year of its prior forecast. A strong case can be made that tax reform played a predominant role in accelerating GDP growth.”
Just because Gov. Cuomo is salty over Republican tax reform doesn’t mean he’s right to malign fiscal conservatives. And if spending cuts are the solution to balancing his state’s budget, so be it. Cuomo wailed, “God forbid if the rich leave.” That’s entirely within his power to control.